Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 1 of 14
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
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`
`ANDREW OKULSKI,
`Plaintiff,
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`v.
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`CARVANA, LLC, PAUL BREAUX, AND
`KATELYN GREGORY,
`Defendants.
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`
`
`
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`CIVIL ACTION
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`
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`NO. 20-1328
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`
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`MEMORANDUM OPINION
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`When a used Nissan car Plaintiff Andrew Okulski purchased from an online car dealer,
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`Carvana, LLC (“Carvana”), malfunctioned he sued Carvana, as well as its Vice President and
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`General Counsel Paul Breaux and employee Katelyn Gregory (collectively, “Defendants”),
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`alleging a wide-ranging consumer fraud scheme, premised on the theory that the car’s defects are
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`inconsistent with Carvana’s advertising and other documents Carvana gave him when he bought
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`the car. In his Second Amended Complaint, Okulski brings claims of fraud and negligent
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`representation, as well as violations of the Pennsylvania Board of Vehicles Act (“BVA”), 63 P.S.
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`§ 818.1 et seq., and the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73
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`Pa. C.S.A. § 201-1 et. seq., against all Defendants and a breach of contract claim against
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`Carvana. Breaux has moved to dismiss all claims against him for lack of personal jurisdiction,
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`and all three Defendants collectively move to dismiss the fraud, negligent misrepresentation,
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`BVA, and UTPCPL claims for failure to state a claim.1
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`I.
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`FACTUAL BACKGROUND AND PROCEDURAL HISTORY
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`On July 16, 2019, Okulski, a Pennsylvania resident, bought a used 2017 Nissan Versa
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`1 Carvana’s motion does not seek to dismiss the breach of contract claim.
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 2 of 14
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`(“the Vehicle”) from Carvana for just over $16,000. Carvana is an e-commerce platform for
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`buying and selling used cars. The company is publicly traded and has its principal place of
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`business in Arizona. Defendant Breaux is an Arizona resident and works at Carvana’s
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`headquarters.
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`In connection with the purchase, Okulski and Carvana executed a series of agreements,
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`including the Retail Purchase Agreement (the “RPA”), the Retail Installment Contract and
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`Security Agreement (the “RISC”), the Carvana Care Application (the “Application”), the
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`Odometer Disclosure Statement, the Carvana Limited Warranty, and the GAP Addendum to
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`Retail Installment Contract (collectively, the “Transaction Documents”).2 Breaux executed the
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`Transaction Documents on behalf of Carvana by remotely electronically signing them.
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`There is considerable disagreement as to where the Vehicle was purchased. Okulski
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`maintains that it was purchased at “CARVANA PHILA,” where he signed the Transaction
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`Documents and took possession of the car. Defendants respond that “CARVANA PHILA” is a
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`pleading fiction invented by Plaintiff—it is not a separate legal entity or party in this case.
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`Because Carvana is an online retailer, it maintains the purchase was made online. Notably, the
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`RPA’s header states “Retail Purchase Agreement – Georgia” and the document identifies the
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`dealership selling the car as Carvana, LLC, located in Winder, Georgia. By the terms of the
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`2 Okulski has attached these agreements, as well as the Vehicle’s CarFax report and screenshots of Carvana’s
`website, to his Complaint. Because the Complaint’s allegations rely on these documents, the Court may consider
`them in deciding the motion to dismiss. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
`1997) (explaining that courts may consider documents that are integral or explicitly relied upon in a complaint
`without converting a motion to dismiss into one for summary judgment).
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`Additionally, Defendants ask the Court, in ruling on their Motion to Dismiss to consider Carvana’s 2019 and 2020
`Annual Reports. Because the Complaint cites to both documents and they are publicly filed with the Securities &
`Exchange Commission, the Court may consider them in ruling on this motion to dismiss. See Mayer v. Belichick,
`605 F.3d 223, 230 (3d Cir. 2010) (explaining that on motion to dismiss under Rule 12(b)(6), a court may consider
`“matters of public record, as well as undisputedly authentic documents if the complainant’s claims are based upon
`these documents”).
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`2
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`contract, Okulski “agree[d] to accept title and ownership of the Vehicle” in Georgia. The
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`Application and the RISC also identify the Winder, Georgia dealership as the seller, although the
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`RISC has a choice of law provision staying “[t]his contract is governed by the law of
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`Pennsylvania.”
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`Several months after the purchase and after driving the Vehicle for approximately 3,000
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`miles, the car began to have mechanical problems including engine misfires, a shorted engine
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`coil, shuddering on acceleration and shaking when the car went over 40 miles an hour. Okulski
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`took the Vehicle to a shop for repairs, which were performed pursuant to warranties at no cost to
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`him. Okulski alleges that the repair shop discovered “numerous classic, tell-tale signs of
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`damage, improper and incomplete repairs, and still existing damage”. Although at the time he
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`bought the Vehicle, the CARFAX report did not show any reported accidents, and Defendant
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`Gregory, a Carvana salesperson, represented to him that the only blemish was a small scratch
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`under the right-side headlight, Okulski concluded that it had been involved in an accident,
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`The core of Okulski’s Complaint is that he was induced to purchase the Vehicle by
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`Defendants’ representation to him that it had been “carefully inspected” and was “CARVANA
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`CERTIFIED.” But, he contends that these representations were untrue: rather it was “in a
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`damaged, defective, unfit, unmerchantable and unsafe condition.” He further alleges that Breaux
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`was required to be licensed in Pennsylvania but was not, and therefore his signing the
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`Transaction Documents constituted “licensing evasion.”
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`II.
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`ANALYSIS
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`A. Breaux’s Motion to Dismiss for Lack of Personal Jurisdiction
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`As a preliminary matter, Defendant Breaux asserts that the Second Amended Complaint
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`as it pertains to him should be dismissed under Rule 12(b)(2) because the Court lacks personal
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`3
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 4 of 14
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`jurisdiction over him in that he is an Arizona citizen with no substantial contacts in
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`Pennsylvania.
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`To survive a motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule
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`of Civil Procedure 12(b)(2), “the plaintiff bears the burden of establishing personal jurisdiction.”
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`O’Connor v. Sandy Lane Hotel, Co., 496 F.3d 312, 316 (3d Cir. 2007). “[W]hen the court does
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`not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima
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`facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true
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`and all factual disputes drawn in its favor.” Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d
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`Cir. 2004); Carteret Sav. Bank, F.A. v. Shushan, 954 F.2d 141, 142 n.1 (3d Cir. 1992).3
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`“A Rule 12(b)(2) motion . . . is inherently a matter which requires resolution of factual
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`issues outside the pleadings, i.e. whether in personam jurisdiction actually lies.” Time Share
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`Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66 n.9 (3d Cir. 1984). Thus,
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`once the defense has been raised, then the plaintiff must sustain its burden of proof
`in establishing jurisdictional facts through sworn affidavits or other competent
`evidence. [A]t no point may a plaintiff rely on the bare pleadings alone in order to
`withstand a defendant’s Rule 12(b)(2) motion to dismiss for lack of in personam
`jurisdiction. Once the motion is made, plaintiff must respond with actual proofs,
`not mere allegations.
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`Patterson v. FBI, 893 F.2d 595, 603-04 (3d Cir. 1990). Thus, once Breaux moved to dismiss for
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`lack of personal jurisdiction, Okulski had the burden of coming forth with competent evidence
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`demonstrating that Breaux had sufficient contacts to justify the Court’s exercise of personal
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`jurisdiction. See BP Chems. Ltd. v. Formosa Chem. & Fibre Corp., 229 F.3d 254, 259 (3d Cir.
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`2000) (citation omitted).
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`3 “A district court . . . may require more than a prima facie showing of jurisdiction by holding a quasi-evidentiary
`hearing. . . .” C. Wright & A. Miller, Federal Practice & Procedure § 1067.6. “[I]f the Court conducts an
`evidentiary hearing, the plaintiff has the more substantial burden of proving that personal jurisdiction is proper by a
`preponderance of the evidence.” Steinfeld v. EmPG Intern., LLC, 97 F. Supp.3d 606, 611-12 (E.D. Pa. 2015)
`(internal quotations and citations omitted). The Court has reviewed the exhibits attached to their briefs by the
`parties and, having done so, does not find it necessary to hold an evidentiary hearing.
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`4
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`Personal jurisdiction over a non-resident defendant is proper only if permitted by
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`Pennsylvania’s long-arm statute and the United States Constitution. See Pennzoil Prods. Co. v.
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`Colelli & Assocs., Inc., 149 F.3d 197, 200 (3d Cir. 1998). Pennsylvania’s long-arm statute
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`authorizes personal jurisdiction to the extent permitted by the Fourteenth Amendment of the
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`Constitution. See Pa. C.S.A. § 5322(b); Vetrotex Certainteed Corp. v. Consol. Fiber Glass
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`Prods. Co., 75 F.3d 147, 150 (3d Cir. 1996). Thus, the personal jurisdiction inquiry merges into
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`a single due process analysis under the Constitution. O’Connor, 496 F.3d at 316.
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`There are two basic forms of personal jurisdiction: general and specific. “For an
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`individual, the paradigm forum for the exercise of general jurisdiction is the individual’s
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`domicile. . . .” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011); see
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`also Decker v. Dyson, 165 F. App’x 951, 953 (3d Cir. 2006) (“Under Pennsylvania law, general
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`jurisdiction arises over an individual, non-corporate defendant if the person’s domicile or
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`presence was in the state at the time of service of process, or there was consent to suit.”).
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`Okulski’s Complaint does not indicate where Breaux lives. Neither has he attached to his
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`opposition to the Rule 12(b)(2) motion any declaration or exhibits to remedy this lacuna. See
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`Patterson, 893 F.2d at 603-04 (explaining that “once the [jurisdictional] defense has been raised,
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`then the plaintiff must sustain [her] burden of proof in establishing jurisdictional facts through
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`sworn affidavits or other competent evidence”). Breaux on the other hand has attached a sworn
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`declaration to the motion to dismiss in which he states that he has never lived in Pennsylvania
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`and has been domiciled in Arizona since 2015. Accordingly, there is no general jurisdiction over
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`Breaux in Pennsylvania.
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`“Specific personal jurisdiction exists when the defendant has ‘purposefully directed his
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`activities at residents of the forum and the litigation results from alleged injuries that ‘arise out of
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`or relate[] to’ those activities.’” BP Chems. Ltd., 229 F.3d at 259 (quoting Burger King Corp. v.
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`Rudzewicz, 471 U.S. 462, 472 (1985)). The specific jurisdiction inquiry has three parts: (1) the
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`defendant must have “purposefully directed his activities at the forum,” (2) the litigation must
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`“arise out of or relate to at least one of those activities,” and (3) “if the first two requirements
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`have been met a court may consider whether the exercise of jurisdiction comports with fair play
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`and substantial justice.” D’Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d
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`94, 102 (3d Cir. 2009).
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`Okulski’s argument is that by signing the RISCs, some of which were for vehicles sold in
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`Pennsylvania, Breaux purposefully directed his activities at Pennsylvania. Certainly,
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`“‘jurisdiction over corporate officers in their personal capacities may be based on acts performed
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`in their corporate capacity. . .”, Hyndman v. Johnson, 2011 WL 570088, at *4 (E.D. Pa. Feb. 15,
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`2011) (emphasis added) (quoting Am. Intern. Airways, Inc. v. Am. Intern. Grp., Inc., 1991 WL
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`87276, at *4 (E.D. Pa. May 21, 1991)), but “only those actions taken within the forum state are
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`to be considered in the jurisdictional analysis.” Am. Intern., 1991 WL 87276, at *4. “[A]n
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`individual’s transaction of business solely as an officer or agent of a corporation does not create
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`personal jurisdiction over that individual.” Feld v. Tele-View, Inc., 422 F. Supp. 1100, 1104
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`(E.D. Pa. 1976) (citing Miller v. Am. Tel. & Telegraph Co., 394 F. Supp. 58, 62-63
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`(E.D. Pa. 1975), aff’d, 530 F.2d 964 (3d Cir. 1976)).
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`In his Second Amended Complaint, Okulski readily admits that Breaux has never
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`regularly worked in Philadelphia and signed the Transaction Documents while “physically
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`located in Arizona.” Breaux’s uncontradicted affidavit states that he is not involved “in the
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`execution of day-to-day vehicle sales” but rather signs certain documents as a duly authorized
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`agent of Carvana. He did not know the car at issue here was being purchased by a Pennsylvania
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 7 of 14
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`resident, and indeed the Transaction Documents state that the sale took place in Georgia.
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`Breaux’s limited engagement with this matter, which consisted of robo-signing certain corporate
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`contracts, does not constitute Breaux “purposefully directing” his activities at Pennsylvania. See
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`Burger King, 471 U.S. at 473; see also Feld, 422 F. Supp. at 1104. Under these facts, specific
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`jurisdiction does not exist over Breaux in Pennsylvania.
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`B. Defendants’ Motion to Dismiss for Failure to State a Claim
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`To survive a motion to dismiss for failure to state a claim pursuant to Federal Rule of
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`Civil Procedure 12(b)(6), the Complaint must contain “sufficient factual matter, accepted as true,
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`to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
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`(internal quotations omitted). The relevant question is not whether the claimant “will ultimately
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`prevail . . . but whether [the] complaint [is] sufficient to cross the federal court’s threshold.”
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`Skinner v. Switzer, 562 U.S. 521, 531 (2011).
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`Defendants collectively assert that Plaintiff’s claims for common law fraud, negligent
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`misrepresentation, and violations of the UTPCPL and BVA should be dismissed pursuant to Rule
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`12(b)(6), on the following grounds: (1) application of the “gist of the action” doctrine and/or the
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`economic loss doctrine; (2) application of Rule 9(b), which requires that claims sounding in
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`fraud be pled with particularity; and, (3) either the BVA does not apply here, or if it does,
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`Okulski has failed to plead a cognizable BVA violation. Because the Court finds Defendants’
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`other arguments dispositive, Defendant’s Rule 9(b) argument need not be addressed.
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`Defendants contend that any representations regarding the Vehicle are covered by
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`contract, and accordingly, the gist of the action doctrine precludes the fraud and negligent
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`representation claims which merely recast breach of contract claims as torts. Okulski responds
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`that his Complaint is focused on fraud, not breach of contract, and that his allegations are rooted
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 8 of 14
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`in fraudulent inducement to enter a contract, which he argues falls outside the scope of the gist of
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`the action doctrine.
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`The gist of the action doctrine “is designed to maintain the conceptual distinction
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`between breach of contract claims and tort claims. As a practical matter, the doctrine precludes
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`plaintiffs from re-casting ordinary breach of contract claims into tort claims.” eToll, Inc. v.
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`Elias/Savion Advert., Inc., 811 A.2d 10, 14 (Pa. Super. 2002) (internal citation omitted). The
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`doctrine bars tort claims:
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`(1) arising solely from a contract between the parties; (2) where the duties allegedly
`breached were created and grounded in the contract itself; (3) where the liability
`stems from a contract; or (4) where the tort claim essentially duplicates a breach of
`contract claim or the success of which is wholly dependent on the terms of a
`contract.
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`Id. at 19.
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`Courts evaluate the “gist or gravamen of the cause of action stated in the complaint” to
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`determine whether, “although sounding in tort, [it] is, in actuality, a claim against the party for
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`breach of its contractual obligations.” Bruno v. Erie Ins. Co., 106 A.3d 48, 53 (Pa. 2014).
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`“[T]he mere labeling by the plaintiff of a claim as being in tort, e.g., for negligence, is not
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`controlling.” Id. at 68. “Whether the gist of the action doctrine applies in any particular setting
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`is a question of law.” The Knit With v. Knitting Fever, Inc., 2009 WL 3427054, at *5 (E.D. Pa.
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`Oct. 20, 2009), aff’d, 625 F. App’x 27 (3d Cir. 2015).
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`In eToll, the seminal Pennsylvania case on the application of the gist of the action
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`doctrine to fraud claims, the Superior Court held that the doctrine applies to claims alleging fraud
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`in the performance of a contract but observed (without holding) that “fraud in the inducement of
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`a contract would not necessarily be covered by [the] doctrine because fraud to induce a person to
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`enter into a contract is generally collateral to (i.e., not ‘interwoven’ with) the terms of the
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`contract itself.” 811 A.2d at 17 (emphasis in original). Thus, as Okulski correctly states, there is
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 9 of 14
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`a basis for drawing a distinction between fraudulent inducement claims and fraudulent
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`performance claims. But Pennsylvania federal courts have reached different conclusions from
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`the state courts about whether the gist of the action doctrine bars fraudulent inducement claims.
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`Compare Williams v. Hilton Group PLC, 93 F. App’x 384, 386-87 (3d Cir. 2004) (affirming
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`fraudulent inducement claim being barred by gist of the action doctrine); Vives v. Rodriguez, 849
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`F. Supp.2d 507, 518-20 (E.D. Pa. 2012) (collecting cases and holding that fraudulent inducement
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`claims were barred by gist of the action doctrine where “the false representation concerned duties
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`later enshrined in the contract”) with Telwell v. Grandbridge Real Estate Capital LLC, 143 A.3d
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`421, 429-30 (Pa. Super. 2016) (refusing to dismiss fraudulent inducement claim based on gist of
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`the action doctrine); Sullivan v. Chartwell Inv. Partners, LP, 873 A.2d 710, 719 (Pa. Super.
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`2005) (same).
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`As this Court has previously discussed, see Wen v. Willis, 117 F. Supp.3d 673 (E.D. Pa.
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`2015), although courts are far from unified on this question, absent specific guidance from the
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`Third Circuit or the Pennsylvania Supreme Court, this Court continues to “opt for the
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`interpretation [of Pennsylvania law] that restricts liability, rather than expands it, until the
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`Supreme Court of Pennsylvania decides differently.” Id. at 682 (quoting Vives, 849 F. Supp.2d
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`at 522). This Court therefore continues to rely on the holding in Vives, which after a thorough
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`analysis of the case law predicted that the Pennsylvania Supreme Court would apply the gist of
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`the action doctrine to bar fraudulent inducement claims arising from the misrepresentation of an
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`intention to perform under a contract. See 849 F. Supp.2d at 520; see also Clark v. EMC
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`Mortgage Corp., 2009 WL 229761, at *4 (E.D. Pa. Jan. 29, 2009) (“Since eToll, courts have
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`established few bright-line rules in the area, but rather have explored, on a case-by-case basis,
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`the applicability of the gist of the action doctrine to claims of fraud that relate to party contracts,
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 10 of 14
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`including claims of fraud in the inducement of such contracts.”).
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`Given this backdrop, the resolution of this issue turns on the gist of the action doctrine’s
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`fundamental question: “What’s this case really about?” Downs v. Andrews, 639 F. App’x 816,
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`819 (3d Cir. 2016) (internal quotations omitted). Here, Okulski’s fraud and negligent
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`misrepresentation claims are based on Defendants’ alleged misrepresentations in the course of
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`the transaction, which are contained in the Transaction Documents. Specifically, the Complaint
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`alleges that “[p]rior to and during the subject transaction,” Defendants misrepresented the
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`Vehicle’s condition and accident and inspection history—misrepresentations that Okulski trusted
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`and that induced him to make the purchase. The CarFax report Carvana supplied as part of the
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`transaction stated that the Vehicle had been in “no accidents” and that “no damage” had been
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`reported. Additionally, as Okulski alleges, “Defendants provided express warranties, including
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`that the vehicle was carefully inspected [and] CARVANA CERTIFIED”—indeed, pursuant to
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`the parties’ agreements, the Vehicle was covered by a 100-day limited warranty as well as a
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`manufacturer’s warranty.
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`Okulski’s allegations about Defendants’ knowledge at the time of signing are akin to a
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`party signing a contract knowing they have no intention of performing their duties under it. See
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`Downs, 639 F. App’x at 820 (barring fraud in the inducement claim based on defendants’
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`“alleged failure to fulfill their contractual promises” where “the obligation to perform was the
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`result of the contract”); see also Tier 1 Innovation, LLC v. Expert Tech. Grp., LP, 2007 WL
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`1377664, at *4 (E.D. Pa. May 8, 2007) (dismissing fraud in the inducement and negligent
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`misrepresentation claims stemming from defendant’s representations of its expertise and ability
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`to perform because the parties’ contract was not “merely collateral” but instead “at the heart” of
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`both claims). Moreover, the Complaint alleges that Defendants developed a “scheme” that
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 11 of 14
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`involved “bury[ing]” certain terms “within the fine-print terms and clauses” of the contract. By
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`Okulski’s own description, therefore, the gist of the dispute is about the parties’ contractual
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`terms. The torts allegedly committed by Defendants are “inextricably intertwined” with the
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`parties’ contractual terms. See eToll, 811 A.2d at 21. Such claims are barred under the gist of
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`the action doctrine, and accordingly Defendants’ motion shall be granted on the fraud and
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`negligent misrepresentation claims.4
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`Okulski alleges that Defendants violated the UTPCPL by misrepresenting the condition
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`of the Vehicle. Defendants argue that his UTPCPL claim must also be dismissed under the gist
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`of the action doctrine, or alternatively, the economic loss doctrine, arguing that the claims are
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`premised upon the parties’ contract.5
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`Like the gist of the action doctrine, the economic loss doctrine was established to
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`maintain a boundary between contract and tort law; it “prohibits plaintiffs from recovering in tort
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`economic losses to which their entitlement flows only from a contract. . . .” See Duquesne Light
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`Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618-20 (3d Cir. 1995).6
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`The Pennsylvania Supreme Court has not ruled on whether the economic loss doctrine
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`4 The gist of the action doctrine applies with equal force to bar the tort claims against Gregory because
`“Pennsylvania courts have repeatedly held that employees receive coextensive protection from the gist of the action
`doctrine.” KBZ Commc’ns Inc. v. CBE Techs. LLC, 634 F. App’x 908, 911 (3d Cir. 2015); see also eToll, 811 A.2d
`at 12, 20.
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` 5
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` Defendants move to dismiss “all of the duplicative non-contract claims” under these doctrines, and they include the
`BVA claim in that grouping. However, because Defendants have cited no case law analyzing how the doctrines
`apply to BVA claims, this argument will not be addressed. See John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119
`F.3d 1070, 1076 n.6 (3d Cir. 1997) (“[A]rguments raised in passing . . . but not squarely argued, are considered
`waived.”).
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` 6
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` Okulski alleges that he suffered not only economic damages but also “harm to his credit rating and credit
`reputation”—yet his only argument on this point is in a footnote that does not connect the alleged harm to any viable
`claim: As stated supra, his fraud and negligent misrepresentation claims will be dismissed and, with respect to his
`UTPCPL claim, he has not cited any cases permitting damages under the UTPCPL for harm to a credit rating and
`reputation. See, e.g., Allen v. Wells Fargo, N.A., 2015 WL 5137953, at *9 (E.D. Pa. Aug. 28, 2015) (dismissing
`UTPCPL claim based on alleged “harm to credit score” because plaintiff could not “show that he suffered an
`ascertainable loss”).
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`applies to bar UTPCPL claims for economic damages, but in Werwinski, the Third Circuit
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`predicted that the Pennsylvania Supreme Court would apply the economic loss doctrine to such
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`claims. See Werwinski v. Ford Motor Co., 286 F.3d 661, 681 (3d Cir. 2002). This prediction has
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`long been subject to criticism by the district courts. See, e.g., Catena v. NVR, Inc., 2020 WL
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`3412348, at *6 (W.D. Pa. June 22, 2020) (collecting cases). Moreover, post-Werwinski, the
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`Pennsylvania Superior Court has held that UTPCPL claims are not subject to the economic loss
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`doctrine because they are statutory claims that do not sound in negligence. See Knight v.
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`Springfield Hyundai, 81 A.3d 940, 951-52 (Pa. Super. 2013).
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`But as this Court has previously discussed, see McGuckin v. Allstate Fire and Cas. Ins.
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`Co., 118 F. Supp.3d 716, 720 (E.D. Pa. 2015), when the Third Circuit has predicted how the
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`Pennsylvania Supreme Court will rule on an issue, this Court is bound by that precedent unless
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`one of those two courts subsequently rules otherwise. See also Berkery v. Verizon Commc’ns
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`Inc., 658 F. App’x 172, 174 (3d Cir. 2016) (post-Knight, affirming the dismissal of a UTPCPL
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`claim as barred by the economic loss doctrine and citing Werwinski as binding precedent); Dixon
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`v. Northwestern Mut., 146 A.3d 780, 790 n.12 (Pa. Super. 2016) (noting “with concern” that
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`Knight and Werwinski are “in tension” and that “[t]his split in authority means that state and
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`federal courts in this Commonwealth follow difference substantive rules in considering claims
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`advanced under the UTPCPL”).
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`Thus, following Werwinski, the economic loss doctrine bars Plaintiff’s UTPCPL claim.7
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`7 In Werwinski, the Third Circuit discussed a “limited” exception to the economic loss doctrine for fraudulent
`inducement claims, “but only if the fraud is ‘extraneous to the contract,’ not ‘interwoven with the breach of
`contract.’” 286 F.3d at 676 (quoting Huron Tool & Eng. Co. v. Precision Consulting Servs., Inc., 532 N.W.2d 541,
`545 (Mich. App. 1995)). “‘[W]here the only misrepresentation by the dishonest party concerns the quality or
`character of the goods sold, the other party is still free to negotiate warranty and other terms to account for possible
`defects in the goods’”—and the exception therefore does not apply. Id. That is precisely the case here, and thus the
`limited exception does not work for Okulski; the economic loss doctrine does apply.
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`Additionally, Okulski misconstrues the Pennsylvania Supreme Court’s opinion in Dittman v. UPMC, 196 A.3d 1036
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 13 of 14
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`See Werwinski, 286 F.3d at 680-81 (dismissing UTPCPL claim based on economic loss from
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`defective Ford transmission); see also, e.g., Sarsfield v. Citimortgage, Inc., 707 F. Supp.2d 546,
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`556-59 (M.D. Pa. 2010). Okulski’s UTPCPL claim “flows” from the parties’ contracts, see
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`Duquesne, 66 F.3d at 618—alleging misrepresentations about “the subject vehicle’s history,
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`condition and quality, and the charges and terms within the RISC” and claiming that Defendants
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`“fail[ed] willfully to perform a written agreement with the Plaintiff.” Because no amount of
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`artful pleading will separate them, amendment would be futile, and the UTPCPL claim shall
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`therefore be dismissed with prejudice.
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`Lastly, the remaining Defendants, Carvana and Gregory, move to dismiss the BVA claim
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`against them. Okulski alleges that Breaux was not properly licensed in Pennsylvania, and his
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`signatures on the Transaction Documents on behalf of Carvana therefore constitute a BVA
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`violation.8
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`The BVA makes it unlawful “to engage in the business as a salesperson [or] dealer . . .
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`within this Commonwealth unless the person has secured a license.” 63 Pa. C.S. § 818.303(a)(1)
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`(Pa. 2018), describing it as holding that the economic loss doctrine “only applies where duties arise strictly and
`solely under contract” and contending that it implicitly overrules Werwinski. But in Dittman, the Pennsylvania
`Supreme Court considered only negligence claims—not fraud or statutory claims—and held that economic losses
`are recoverable (i.e., not barred by the economic loss doctrine) where “the plaintiff can establish the defendant’s
`breach of a legal duty arising under common law that is independent of any duty assumed pursuant to contract.” Id.
`at 1038. The court held that because the employees had alleged their employer breached a common law duty to act
`with reasonable care in storing their personal and financial data, a legal duty existed independent of any contractual
`employment obligations between the parties, and the economic loss doctrine did not bar the employees’ negligence
`claims. Id. at 1056.
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`By contrast, the duties that arise here are by virtue of the parties’ contract. Dismissal is therefore appropriate and in
`keeping with other district courts that, post-Dittman, have applied the economic loss doctrine to bar UTPCPL claims
`in similar circumstances. See, e.g., Bordoni v. Chase Home Fin. LLC, 374 F. Supp.3d 378, 386 (E.D. Pa. 2019)
`(discussing Dittman and concluding that “the Court . . . remains bound by the Third Circuit’s holding in Werwinski
`and the economic loss doctrine bars the UTPCPL claim”); Clapps v. State Farm Ins. Cos., 2020 WL 1308230, at *6
`(E.D. Pa. Mar. 19, 2020).
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` Although Okulski includes Gregory in his BVA claim, the Complaint does not include any allegations at all that
`could even arguably be construed to support a BVA claim against her.
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`Case 2:20-cv-01328-WB Document 31 Filed 08/24/20 Page 14 of 14
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`(emphasis added). The Transaction Documents repeatedly stipulate that the Vehicle was
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`purchased from a Georgia dealer. Moreover, the transaction took place online, because as
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`Carvana’s website and Annual Reports explain, it is an online-only business and consumers
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`“execut[e] their purchases” digitally. While Plaintiff describes these stipulations and the online-
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`only business model as a sham, the Court need not accept such conclusory labels. See Iqbal, 556
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`U.S. at 678 (providing that “mere conclusory statements . . . do not suffice”); see also Brightwell
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`v. Lehman, 2006 WL 931702, at *3 (W.D. Pa. April 10, 2006) (noting that “the court need not
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`accept allegations in the complaint as true where they are contradicted by the documents attached
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`to the complaint”). Okulski has offered no authority compelling extension of the BVA’s reach to
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`an online transaction that stipulated the Vehicle was being sold by a Georgia dealer.
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`Accordingly, the BVA claim will be dismissed with prejudice.
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`For the foregoing reasons, Defendants’ motion shall be granted. An appropriate order
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`follows.
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`August 24, 2020
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`BY THE COURT:
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`/s/Wendy Beetlestone, J.
`_______________________________
`WENDY BEETLESTONE, J.
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